Around the world in 60 seconds - 23 July 2010

This week’s events include:

• China battles intense flooding and oil spill
• BP succeeds with oil cap but condemned over Lockerbie bombing
• Goldman Sachs gets record fine while its profits slump
• President Obama signs US financial reform into law

China battles intense flooding and oil spill

Intense rain over the past couple of weeks has caused major flooding in three provinces of central China. Over 700 people have already died and 2.4 million have been displaced from their homes along the Yangtze River.

The region’s mammoth Three Gorges Dam – the world’s largest electricity generator – has recorded its highest water levels ever in its reservoir, which stretches for 660 km.

The water level has already reached 155 metres with another 10 meters is expected, leaving only 10 meters of capacity remaining. Nevertheless, experts point to the dam’s success in its first real test at minimising a flood’s disastrous impact.

In addition to the flooding, Chinese officials are trying to clean up their own oil spill in Dalian, north-east China after two pipelines exploded into a huge fireball last Friday.

The polluted area has grown to 430 sq km and has formed a heavy layer of oil along the coastline.

One cleanup worker has drowned in the oil after being thrown into the sea by waves. Meanwhile, the port’s crucial supply of oil to the country’s south has been cut off while the cleanup takes place.

BP succeeds with oil cap but condemned over Lockerbie bombing

BP’s new cap has successfully stopped the oil flowing into the Gulf of Mexico, thanks to positive results from its testing.

Now, rather than siphon the oil to the surface, they are trying to keep the well sealed until the intercepting relief wells are finished over the next few weeks.

Furthermore this week, BP has come under American fire for another matter. Last year in August, the Scottish Parliament agreed to free the bomber of the American Pan Am flight that crash landed in Lockerbie, Scotland in 1988.

He was freed and allowed to go back to Libya on the grounds that he was severely ill and likely to die within three months.

However, a year later and Abdelbasset al-Megrahi is still alive. It is now being suggested that BP pressured the Scottish Parliament into releasing him so they could get natural gas contracts with the Libyan government.

British Prime Minister David Cameron was visiting President Obama in Washington for the first time this week and was asked by four US Senators if he would conduct a full investigation into the BP allegation out of respect for the victims’ families.

Cameron agreed that the decision was a mistake, but he has refused to conduct an investigation, saying he will only ask an official to go over the documents again and publish any that are relevant.

Goldman Sachs gets record fine while its profits slump

US banking giant Goldman Sachs was fined a record $550 million by America’s financial watchdog the Securities and Exchange Commission (SEC) for alleged fraud and misrepresentation during a transaction it organised in 2007.

The bank settled the case with the SEC before it went to court, with Goldman only forced to admit to negligent behaviour in its misrepresentation, not fraud.

Although it’s the largest fine ever paid by a Wall Street firm, it will only take two weeks of profit for the bank to pay it off.

The bigger worry for Goldman is the damage caused to its reputation and the consequential loss of clients. This is the main reason why the case was settled quietly out of court.

At the same time, Goldman’s profits for the second quarter of the year slumped 82% to $613 million, from a near-record high first quarter of $3.4 billion. This is due to the fine, a one-off bonuses tax imposed on banks by the UK government in December, and economic uncertainty.

President Obama signs US financial reform into law

On Wednesday, President Obama signed into law the huge 2,300-page financial reform bill which covers the new rules for the US banking and financial industry.

It’s the biggest overhaul of such laws since the Great Depression of the 1930s.

Obama claims it means the US taxpayer will never again have to lend enormous amounts of money to banks and companies to avoid a systematic collapse of the economy.

However, others believe the rules are still not strong enough to avoid another economic collapse of any kind – the main purpose of the overhaul.

Photo – The flooded banks of the Yangtze in China